AUD/USD Forex Technical Analysis – Breakout Over .7053 Fibonacci Level Puts .7283 Main Top on Radar

Australian Dollar traders reacted positively on Wednesday to a highly anticipated report on U.S. inflation. The Aussie surged following the release of a report from the Labor Department showing U.S. consumer prices unexpectedly came in flat in the month of July.

On Wednesday, the AUD/USD settled at .7082, up 0.0119 or +1.68%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) finished at $70.10, up $1.21 or +1.76%.

US Consumer Inflation Surprising Flat in July

The Labor Department said its consumer price index was unchanged in July after jumping by 1.3 percent in June. Economists had expected consumer prices to edge up by 0.2 percent.

The report also showed core consumer prices, which exclude food and energy prices, rose by 0.3 percent in July after climbing by 0.7 percent in June. Core prices were expected to increase by 0.5 percent.

The AUD/USD spiked to the upside on the news as the softer than expected inflation data is likely to lead to speculation that the Federal Reserve will slow the pace of interest rate hikes at its September meeting.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Wednesday when buyers took out a pair of main tops at .7047 and .7069. A move through .6870 will change the main trend to down.

The intermediate range is .7283 to .6682. The AUD/USD is trading on the weak side of its retracement zone at .7053 to .6982, making it support.

Short-Term Outlook

Trader reaction to the intermediate Fibonacci level at .7053 is likely to determine the direction of the AUD/USD early Thursday.

Bullish Scenario

A sustained move over .7053 will indicate the presence of buyers. Taking out Wednesday’s high at .7109 will indicate the buying is getting stronger.

The daily chart indicates there is plenty of room to the upside with the nearest targets a minor top at .7246, followed by a main top at .7283.

Bearish Scenario

A sustained move under .7053 will signal the presence of sellers. This won’t change the main trend to down, but it could lead to a pullback into the intermediate 50% level at .6982. This is the last support before the .6870 main bottom.